Income Taxes

12 Months Ended

Dec. 27, 2024

Earnings before income tax expense consist of (in thousands):


	2024		2023		2022
Domestic	$	484,088	$	450,806	$	401,405
Foreign	105,195		157,996		164,319
Total	$	589,283	$	608,802	$	565,724

Income tax expense consists of (in thousands):


	2024		2023		2022
Current
Federal	$	62,402	$	79,732	$	70,976
State and local	6,256		7,282		5,948
Foreign	28,481		23,779		38,152
Current income tax expense	97,139		110,793		115,076
Deferred
Domestic	8,344		(6,919)		(8,733)
Foreign	(2,284)		(1,583)		(1,264)
Deferred income tax expense (benefit)	6,060		(8,502)		(9,997)
Total	$	103,199	$	102,291	$	105,079

Income taxes paid were $104 million in 2024, $111 million in 2023 and $112 million in 2022.

A reconciliation between the U.S. federal statutory tax rate and the effective tax rate follows:


	2024		2023		2022
Statutory tax rate	21	%	21	%	21	%
Tax effect of international operations	1		(1)		1
State taxes, net of federal effect	1		1		1
U.S. general business tax credits	(1)		(1)		(1)

Stock compensation excess tax benefit	(2)		(1)		(1)



Foreign Derived Intangible Income (FDII)	(2)		(2)		(2)

Effective tax rate	18	%	17	%	19	%

Deferred income taxes are provided for temporary differences between the financial reporting and the tax basis of assets and liabilities. The deferred tax assets (liabilities) resulting from these differences were as follows (in thousands):


	2024		2023
Inventory valuations	$	3,456	$	1,005
Accrued self-insurance retentions	1,187		1,390
Accrued warranty and service liabilities	2,392		2,290
Vacation accruals	3,409		3,450
Customer allowances	4,080		4,137
Excess of tax over book depreciation and amortization	(79,728)		(44,197)
Pension benefit obligation	915		10,063
Postretirement medical benefit obligation	5,002		5,039
Acquisition costs	442		—
Stock compensation	12,634		12,686
Deferred compensation	5,305		2,205

Deferred revenue	927		2,024

Research and development	31,543		23,324
Prepayments from foreign subsidiaries	13,872		27,301
Other	3,652		2,449
Net deferred tax assets	$	9,088	$	53,166

Total deferred tax assets were $47 million and $61 million, and total deferred tax liabilities were $38 million and $8 million on December 27, 2024 and December 29, 2023, respectively. The difference between the deferred income tax provision and the change in net deferred income taxes is due to the changes in other comprehensive income (loss) items and acquisition purchase accounting.

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2018.

The Company continues to assert that it will indefinitely reinvest earnings of foreign subsidiaries to support the expansion of its international business. No additional income or withholding taxes have been provided for any remaining undistributed foreign earnings, as these amounts continue to be indefinitely reinvested in foreign operations. As of December 27, 2024, the amount of cash held outside the U.S. was not significant to the Company’s liquidity and was available to fund investments abroad.

The Company records penalties and accrued interest related to uncertain tax positions in income tax expense. Total reserves for uncertain tax positions were not material.

- Definition

The entire disclosure for income tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12

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+ Details

GRACO INC 10-K